Loan sales help bank's parent boost earnings

10:40 a.m. EST, May 5, 2012|Dave Segal, The Honolulu Star-Advertiser

Riding the strength of its growing residential loan portfolio, Territorial Bancorp Inc. posted an 18 percent increase in first-quarter earnings and said it will increase its dividend for the second time in three months.

The parent of Territorial Savings Bank, the state's fifth largest, said Friday that net income last quarter rose to $3.5 million, or 34 cents a share, from $3 million, or 26 cents a share, in the year-earlier period. The bank's loans receivable increased 9 percent to $711.5 million from $652.5 million a year ago as it originated more loans.

Territorial also boosted its dividend 10 percent to 11 cents a share from 10 cents a share. It will be payable June 1 to shareholders of record as of May 18. In February, Territorial boosted its dividend to 10 cents a share from 9 cents a share.

The bank's stock slipped 5 cents to $21.25 Friday on the Nasdaq Stock Market in an overall down day for equities. The earnings were released after the market closed.

"Our core earnings and net interest income increased due to improved loan originations and growth in deposits," said Territorial Chairman and CEO Allan Kitagawa, adding that the dividend is being raised due to the bank's strong performance.

"We feel this was another strong quarter headlined by 13.6 percent annual loan growth (based on the 3.4 percent loan gain from the fourth quarter)," said analyst Mike Shafir of New York-based brokerage firm Sterne Agee. "Territorial remains overcapitalized and continues to return capital to shareholders. The company increased its dividend and is currently on its third repurchase authorization. We expect Territorial to continue to deploy capital in a similar manner throughout 2012."

The bank repurchased 733,988 and 581,265 shares, respectively, in its first two repurchase programs, and as of March 31 had bought 49,934 of its authorized 552,000 shares in its third repurchase program.

Territorial's net interest income, the difference between what the bank pays depositors and what it brings in from loans, rose 4.3 percent last quarter to $13.1 million from $12.5 million a year earlier. Its net interest margin decreased to 3.47 percent from 3.53 percent.

Noninterest income, which includes service charges and fees, rose 28.1 percent to $1.4 million from $1.1 million. The bank said the year-over-year gain was primarily due to a $297,000 increase from the sale of loans and a $62,000 increase from the sale of investment securities.

Deposits at the bank rose 9.6 percent to $1.2 billion from $1.1 billion a year ago, while assets grew 5.6 percent to $1.6 billion from $1.5 billion.

The bank's asset quality remained solid, with its ratio of nonperforming assets to total assets decreasing to 0.17 percent from 0.22 percent on Dec. 31 but up from 0.08 percent a year ago. Territorial's delinquent loans 90 days or more past due and not accruing interest fell to $1.7 million (eight loans) from $2.3 million (nine loans) at the end of 2011 but was up from $1.2 million (10 loans) a year ago.

Territorial set aside just $84,000 for potential loan losses last quarter, compared with $108,000 a year ago.